UNION BUDGET 2012  HIGHLIGHTS – DIRECT TAX PROPOSALS

TAX RATES

For Individual (other than senior citizen)

  • Basic exemption limit increased from Rs. 1.80 lacs to Rs. 2 lacs
  • Tax slab of general tax payers& women category assessee’s is now same
  • 20% tax bracket for income between 5 lacs to 8 lacs increased to Rs. 5 lacs to Rs. 10 lacs

Senior Citizens (60 to 80 years, 80 years & above)

20% tax bracket for income between 5 lacs to 8 lacs increased to Rs. 5 lacs to Rs. 10 lacs

Co-operative Society/Firm/Local Authorities/Companies – No changes in tax rates

A.     WIDENING OF TAX BASE

Alternate Minimum Tax (AMT) on all persons other than companies

  • Under the existing provisions, AMT is levied on LLP.
  • Now AMT is also proposed to be levied on partnership firms, sole proprietorship, AOP
  • A person other than a company, who has claimed deduction under any section (other than section 80P) included in Chapter VI-A under the heading “C – Deductions in respect of certain incomes” or under section 10AA, shall be liable to pay AMT on adjusted total income
  • Adjusted total income” shall be the total income as increased by the deductions claimed under Chapter VI-A under the heading ‘C’ (other than section 80P) and deduction claimed under section 10AA
  • AMT Rate 18.5% (Same as before). Carry forward for 10 subsequent A.Y’s
  • No AMT in case of individual, HUF, AOP or BOI if ATI does not exceed Rs. 20 lacs
  • Section 140A, 234A, 234B , 234C would apply

Tax Deduction at Source (TDS) on transfer of certain immovable properties (other than agricultural land)

  • At present, there is no requirement to deduct tax at source on transfer of immovable property by a resident except in case of compulsory acquisition of certain immovable properties u/s 194LA.
  • New section 194LLA inserted w.e.f. 01.10.2012
  • Every transferee, at the time of making payment or crediting any sum by way of consideration for transfer of immovable property (other than agricultural land), shall deduct tax, at the rate of 1%of such sum, if the consideration paid or payable for the transfer of such property exceeds –

(a) Rs. 50 lacs in case such property is situated in a specified urban agglomeration (7 metro cities, 5 districts & 1 city) or

(b) Rs. 20 lacs in case such property is situated in any other area.

  • Value adopted by the Registrar shall be deemed consideration paid or payable
  • Registrar under Indian Registration Act, 1908 not to register the transfer of any immovable property where taxes are required to be deducted under this provision unless the transferee furnishes proof of deduction and payment of TDS.
  • No requirement to obtain TAN or furnish TDS statement for such transactions. Simple one page challan for payment of TDS would be prescribed containing details (including PAN) of transferor and transferee and certain details of the property.
  • Effective from 01.10.2012

TDS on remuneration to a director which is not in the nature of salary

  • Section 194J amended to provide that tax is required to be deducted on remuneration paid to a director, which is not in the nature of salary (covered by section 192) @10% w.e.f 01.07.2012
  • Board Sitting fees would thus be covered
  • Effective from 01.07.2012

Tax Collection at Source (TCS) on cash sale of bullion and jewellery

  • Seller of bullion and jewellery to collect tax @1% of sale consideration from every buyer of bullion and jewellery if sale consideration exceeds Rs. 2 lacs and the sale is in cash.
  • Amendment w.e.f. 01.07.2012
  • Such collection to be made irrespective of whether buyer is manufacturer or trader or purchase is for personal use

TCS on sale of certain minerals

  • TCS @ 1% by seller from buyer on sale of minerals, being coal or lignite or iron ore
  • Seller not to collect TCS if purchase is for personal consumption or if buyer declares that it is to be utilized for manufacturing, processing or producing article or things

Daily tonnage income of shipping company

Section 115VG amended to revise the rate of daily tonnage income w.e.f A.Y. 13-14

B.     MEASURES TO PREVENT GENERATION AND CIRCULATION OF UNACCOUNTED MONEY

Cash credits u/s 68 of the Act

  • Nature & source of any sum credited as share capital, share application, share premium or any such amount by whatever name called in the books of closely held companies shall be treated as explained only if the source of funds is also explained by the assessee company in the hands of the resident shareholder
  • This additional onus not to apply if shareholder is a well regulated entity, i.e. a Venture Capital Fund, Venture Capital Company registered with SEBI.
  • Amendment w.e.f A.Y. 13-14

Taxation of cash credits, unexplained money, investment etc.

  • At present unexplained credits, money, investment, expenditure, etc., which has been deemed as income u/s 68, 69, 69A, 69B, 69C or 69D subject to tax as per tax rate applicable to assessee thus giving the benefit of basic exemption limit.
  • It is proposed to now tax the same@30% u/s 115BBE newly introduced
  • No deduction in respect of any expenditure or allowance shall be allowed to assessee in computing such deemed income
  • Amendment w.e.f A.Y. 13-14

Compulsory filing of income tax return in relation to assets located outside India

  • Amendment proposed in section 139 whereby furnishing of return may be made mandatory for every resident having any asset (including financial interest in any entity) located outside India or signing authority in any account located outside India irrespective of the fact whether the resident taxpayer has taxable income or not.
  • Amendment w.e.f A.Y. 13-14
  • Prescribed particulars to be furnished

Reassessment of income in relation to any asset located outside India

  • Amendment proposed in section 149 to increase the time limit for issue of notice for reopening an assessment from 6 years to 16 years, where the income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment.
  • Amendment proposed in section 147 to provide that income shall be deemed to have escaped assessment where a person is found to have any asset (including financial interest in any entity) located outside India.
  • Thus all residents having assets outside India & not filed the return would face notice u/s 148
  • Section procedural, applicable for any A.Y. on or before 01.04.2012

Penalty on undisclosed income found during the course of search

  • At present, as per section 271AAA, no penalty is levied if assessee admits the undisclosed income in a statement u/s 132(4) recorded in the course of search and specifies the manner in which such income has been derived and pays the tax together with interest, if any, in respect of such income.
  • Section 271AAA not be applicable for searches conducted on or after01.07.2012
  • New provision section 271AAB for levy of penalty for search initiated on or after 01.07.2012 inserted whereby

–         if undisclosed income is admitted during the course of search, penalty @10% of UDI if certain conditions fulfilled

–         if undisclosed income is not admitted during the course of search but disclosed in the return of income filed after the search, penalty @20% of UDI if certain conditions fulfilled

–         Other than above, penalty ranging from 30% to 90% of UDI

–         Return must be filed on or before 139(1)/153A time limit

Expediting prosecution proceedings under the Act

  • New sections 280A, 280B, 280C and 280D introduced to strengthen the prosecution mechanism by

–         providing for constitution of Special Courts for trial of offences

–         application of summons trial for offences under the Act to expedite prosecution proceedings as the procedures in a summons trial are simpler and less time consuming

–         providing for appointment of public prosecutors

 As per existing provisions of section 276C, 276CC, 277, 277A and section 278,whereamount of tax, penalty or interest which would have been evaded by a person exceeds Rs. 1 lacs, he shall be punishable with rigorous imprisonment for a term which shall not be less than 6 months but which may extend to 7years and with fine. The threshold of Rs. 1 lacs proposed to be revised to Rs. 25 lacs.

  • As per existing, where the amount evaded does not exceeds Rs. 1 lacs, rigorous imprisonment for a term which shall not be less than 3 months but which may extend to 3 years & with fine. Proposed to reduce the extended time from 3 years to 2 years.
  • Amendment to be effective from 01.07.2012

Share premium in excess of the fair market value to be treated as income

  • Proposed to inset a new clause (viib) in section 56(2)
  • Clause will apply where a company, not being a company in which the public are substantially interested, receives, in any previous year, from any person being a resident, any consideration for issue of shares.
  • If the consideration received for issue of shares exceeds the face value of such shares, the aggregate consideration received for such shares as exceeds the fair market value of the shares shall be chargeable to income tax under the head “Income from other sources.
  • Provision shall not apply where the consideration for issue of shares is received by a venture capital undertaking from a venture capital company or a venture capital fund.
  • Company to be provided an opportunity to substantiate its claim regarding the fair market value
  • Amendment to be effective from A.Y. 13-14

C.     TAX INCENTIVES AND RELIEFS

Tax incentive for funding of certain Infrastructure Sectors

  • Section 115A of the Income Tax Act provides that any interest income received by any non-resident from the Government or an Indian concern shall be taxable at the rate of 20% on the gross amount of such interest income. The interest income received by a non-resident from a notified Infrastructure Debt Fund (IDF) is taxable at a reduced rate of 5% on gross amount of such interest income.
  • In order to provide an incentive to the infrastructure sector an amendment in the section 115A has been proposed and accordingly interest paid by a specified company viz companies engaged in the business of construction of dam, operation of Aircraft, manufacture or production of fertilizers, construction of port including inland port, construction of road, toll road or bridge, generation, distribution of transmission of power, construction of ships in a shipyard to a non-resident in respect of borrowing made in foreign currency from sources outside India between 1st July, 2012 and 1st July, 2015, under an agreement, including rate of the interest payable, approved by the Central Government, shall be taxable at the rate of 5% (plus applicable surcharge and cess).
  • This amendment to be effective from A.Y. 13-14
  • Accordingly new section 194LC has been inserted to provide that interest income paid by such specified company to a non resident shall be subjected to tax deduction at source at the rate of 5% (plus applicable surcharge and cess).This amendment to be effective from 01.07.2012
  • Specified co. is that engaged in infrastructure activity i.e. dam, aircraft, fertilizer, port, road/bridge, power, ships, affordable housing projects

Lower rate of tax on dividends received from foreign companies

  • As per the existing provisions of section 115BBD tax @ 15% is payable if the dividend is received from a foreign company in which it has shareholding of 26% or more.
  • Applicability of this provision was only up to A.Y 2012-13 which has been extended to one more year i.e.  2013-14.

Provisions relating to Venture Capital Fund (VCF) or Venture Capital Company (VCC)

  • As per the existing provisions income from the venture capital funds or Venture Capital Company are taxable only on the payment received by the investor from such VCF and VCC and there were no TDS norms applicable on the it and whole income is taxable as per the provisions of section 115U in the hands of investor as if such investment was made by the investor in the VCC and VCF.
  • As per the amended provisions in section 10(23FB) and in section115U sub section 4 has been substituted

–         The venture Capital undertaking shall have same meaning as provided in relevant SEBI regulations and there would be no sectoral restriction.

–         Income accruing to VCF/ VCC shall be taxable in the hands of investor on accrual by deeming it to be credited to the account of the said person on the last day of the previous year in the same proportion in which such person would have been entitled to receive the income had it been paid in the previous year.

–         The exemption from applicability of TDS provisions on income credited or paid by VCF/ VCC to investors shall be withdrawn.

  • Amendment to be effective from A.Y. 13-14

Removal of the cascading effect of Dividend Distribution Tax (DDT)

  • As per the existing section 115-O of the Act provides that dividend liable for DDT in case of a company is to be reduced by an amount of dividend received from its subsidiary after payment of DDT if the company is not a subsidiary of any other company.
  • As per the amendment in the section clause (c) i.e. company is not a subsidiary of any other company has been removed and accordingly in case any company receives, during the year, any dividend from any subsidiary and such subsidiary has paid DDT as payable on such dividend, then, dividend distributed by the holding company in the same year, to that extent, shall not be subject to Dividend Distribution Tax under section 115-O of the Act.

Exemption in respect of income received by certain foreign companies

  • A new clause (48) has been inserted in section 10 in order to provide exemption in respect of income of a foreign company received in India in Indian currency on account of sale of crude oil to any person in India subject to following:-

–         The receipt of money is under an agreement or an arrangement which is either entered into by the Central Government

–         The foreign company, and the arrangement or agreement has been notified by the Central Government having regard to the national interest in this behalf.

–         The receipt of the money is the only activity carried out by the foreign company in India.

  • This amendment will take effect retrospectively from 1st April, 2012 and will, accordingly, apply in relation to the assessment year 2012-13 and subsequent years once such arrangement or agreement is notified

Extending benefit of initial depreciation to the power sector

  • As per the existing section 32(1) (iia) the benefit of initial depreciation is not available on the new machinery or plant installed by an Assessee engaged in the business of generation or generation and distribution of power.
  • In order to give the benefit of initial depreciation to assessee engaged in the business of generation or generation and distribution of power amendment has been made by inserting the word “or in the business of generation or generation and distribution of power” in section 32(1) (iia) so that initial depreciation can also be availed on the new machinery or plant installed by an assessee in this respect.

Weighted deduction for scientific research and development

  • Under the existing provisions of Section 35(2AB) of the Income-tax Act, a company is allowed weighted deduction at the rate of 200% of expenditure (not being in the nature of cost of any land or building) incurred on approved in-house research and development facilities. These provisions are not applicable in respect of any expenditure incurred by a company after 31st March, 2012.
  • In order to extend the benefit the period has been extended for a further period of five years i.e. upto 31st March 2017.

Weighted deduction for expenditure incurred on agricultural extension project

  • In order to incentivize the business entities to provide better and effective agriculture extensive services a new section 35CCC has been inserted, to allow weighted deduction of 150% of the expenditure incurred on agricultural extension project. The agricultural extension project eligible for this weighted deduction shall be notified by the Board in accordance with the prescribed guidelines.
  • Amendment to be effective from A.Y. 13-14

Weighted deduction for expenditure for skill development

  • In order encourage the private sector to set up their own institutions a new section 35CCD has been inserted, to allow weighted deduction of 150% of expenses (not being expenditure in the nature of cost of any land or building) incurred on skill development project. The skill development project eligible for this weighted deduction shall be notified by the Board in accordance with the prescribed guidelines.
  • Amendment to be effective from A.Y. 13-14

Turnover or gross receipts for audit of accounts and presumptive taxation

  • Limit of total sales, turnover or gross receipts, specified under section 44AB for getting accounts audited, from sixty lacs rupees to one crore rupees
  • In the case of persons carrying on business and from fifteen lacs rupees to twenty five lacs rupees in the case of persons carrying on profession.
  • U/s 44AD, the threshold limit of total turnover or gross receipts would be increased from sixty lacs rupees to one crore rupees.
  • Amendment to be effective from A.Y. 13-14

Exemption for Senior Citizens from payment of advance tax

In order to reduce the compliance burden of such senior citizens, it is proposed that a resident senior citizen, not having any income chargeable under the head “Profits and gains of business or profession”, shall not be liable to pay advance tax and such senior citizen shall be allowed to discharge his tax liability (other than TDS) by payment of self assessment tax.

Wealth Tax – Exemption of residential house allotted to employee etc. of a company

Threshold of gross salary from Rs. 5 lacs to Rs. 10 lacs for the purpose of levying wealth-tax on residential house allotted by a company to an employee or an officer or a whole time director.

Relief from long-term capital gains tax on transfer of residential property if invested in a manufacturing small or medium enterprise

New section 54GB has been inserted so as to provide relief from long term capital gains tax to an individual or an HUF on sale of a residential property (house or plot of land) in case of re-investment of sale consideration in the equity of a new start-up SME company in the manufacturing sector which is utilized by the company for the purchase of new plant and machinery subject to following conditions:-

–         The amount of net consideration is used by the individual or HUF before the due date of furnishing of return of income under sub-section (1) of section 139, for subscription in equity shares in the SME company in which he holds more than 50% share capital or more than 50% voting rights.

–         SME company should use the capital for the purchase of new plant and machinery within a period of one year from the date of subscription in the equity shares

–         In case of non utilization, the unutilized amount shall be deposited under a deposit scheme to be prescribed in this behalf.

–         Restrict the transfer of the shares of the company, and of the plant and machinery for a period of 5 years. Further, capital gains would be subject to taxation in case any of the conditions are violated.

–         The relief would be available in case of any transfer of residential property made on or before 31st March, 2017 and will apply from A.Y 2013-14.

Reduction in the rate of Securities Transaction Tax (STT)

STT in Cash Delivery segment is reduced from the existing 0.125% to 0.1%.

Deduction in respect of capital expenditure on specified business

  • For the purposes of the investment-linked deduction under section 35AD specified business” include three new businesses namely:-

–         Setting up and operating an inland container depot or a container freight station notified or approved under the Customs Act, 1962 (52 of 1962),

–         Bee-keeping and production of honey and beeswax,

–         Setting up and operating a warehousing facility for storage of sugar.

  • Date of commencement of operations for availing investment linked deduction in respect of the three new specified businesses shall be on or after 1st April, 2012
  • Further for some specified business a deduction of 150% of the capital expenditure, is also proposed namely:-

–         setting up and operating a cold chain facility;

–         setting up and operating a warehousing facility for storage of agricultural produce

–         building and operating, anywhere in India, a hospital with at least one hundred beds for patients;

–         developing and building a housing project under a scheme for affordable housing framed by the Central Government or a State Government, as the case may be, and notified by the Board in this behalf in accordance with the guidelines as may be prescribed;

–         production of fertilizer in India.

  • Amendment to be effective from A.Y. 13-14
  • Further a new subsection (1A) 35AD is inserted which clarifies that where the assessee builds a hotel of two-star or above category as classified by the Central Government and subsequently, while continuing to own the hotel, transfers the operation thereof to another person, the assessee shall be deemed to be carrying on the specified business of building and operating hotel.

Extension of sunset date for tax holiday for power sector

It is proposed to amend the provisions of section 80-IA(4)(iv) to extend the terminal date for a further period of one year, i.e., up to 31st March, 2013.

Reduction of the eligible age for senior citizens for certain tax reliefs

  • In sections 80D (deduction in respect of premia paid towards a health insurance policy) , 80DDB (deduction medical treatment of a specified disease) and 197A the effective age for a “senior citizen” who can avail of the benefit is mentioned as sixty-five years or more at any time during the relevant previous year.
  • Amendment is made to reduce the age for availing of the benefits by a senior citizen under the aforesaid sections (sections 80D, 80DDB and 197A) from sixty-five years to sixty years.
  • Amendments to section 80D and section 80DDB will take effective from 1st April, 2013, Amendment to section 197A will take effect from 1st July, 2012.

Deduction for expenditure on preventive health check-up

In addition to the existing deduction allowed under section 80D in respect of premium paid towards a health insurance policy for insurance of self, spouse and dependant children or any contribution made to the Central Government Health Scheme, up to a maximum of Rs.15,000 in aggregate. A further deduction of Rs.15,000 is also allowed for buying a health insurance policy in respect of parents. It is proposed that any payment made by an assessee on account of preventive health check-up of self, spouse, dependant children or parents(s) during the previous year as eligible for deduction within the overall limits prescribed in the section but maximum to Rs 5000. Payment can be in cash.

Deduction in respect of interest on deposits in savings accounts

A new section 80 TTA is introduced in which a deduction up to an extent of ten thousand rupees in aggregate shall be allowed to an assessee, being an individual or a Hindu undivided family, in respect of any income by way of interest on deposits (not being time deposits) in a savings account with banking company to which the Banking Regulation Act, 1949, co-operative society engaged in carrying on the business of banking, post office.

D.    RATIONALIZATION OF TAX DEDUCTION AT SOURCE (TDS) AND TAX COLLECTION AT SOURCE (TCS) PROVISIONS

Deemed date of payment of tax by the resident payee

  • Amendment proposed in section 201 to provide clarity regarding discharge of tax liability by the resident payee on payment of any sum received by him without deduction of tax at source by the payer
  • Payer shall not be an assessee in default in respect of such tax if such resident payee

–         has furnished his return of income u/s 139

–         has taken into account such sum for computing income in such return of income; and

–         has paid the tax due on the income declared by him in such return of income

–         payer furnishes a certificate to above effect from accountant in prescribed form

  • The date of payment of taxes by the resident payee shall be deemed to be the date on which return has been furnished by the payee
  • Interest u/s 201(1A)(i) shall be payable from the date on which such tax was deductible to the date of furnishing of return of income by such resident payee
  • Amendments on similar lines are also proposed to be made in the provisions of section 206C relating to TCS for clarifying the deemed date of discharge of tax liability by the buyer or licensee or lessee
  • Amendment to be effective from 01.07.2012

Disallowance of business expenditure on account of non-deduction of tax on payment to resident payee

  • At present, where disallowance of expenditure is made u/s 40(a)(ia) due to non-deduction of tax but tax is deducted in subsequent previous year, expenditure is allowed in that subsequent previous year of deduction.
  • Proposed to amend section 40(a)(ia) to provide that where an assessee makes payment of the nature specified in the said section to a resident payee without deduction of tax and is not deemed to be an assessee in default u/s 201(1) on account of payment of taxes by the payee, then, for the purpose of allowing deduction of such sum, it shall be deemed that the assessee has deducted and paid tax on such sum on the date of furnishing of return of income by the resident payee.
  • These beneficial provisions are proposed to be applicable only in case of resident payee
  • Amendment to be effective from A.Y. 13-14

Fee and penalty for delay in furnishing of TDS/TCS Statement and penalty for incorrect information in TDS/TCS Statement

  • At present as per section 272A, penalty of Rs.100 per day is levied for delay in furnishing of TDS statement. However, no specific penalty is specified for furnishing of incorrect information in the TDS statement.
  • It is proposed to provide for levy of fee of Rs.200 per day for late furnishing of TDS statement. The total amount of fee shall not exceed the total amount of tax deductible during the period for which the TDS statement is delayed
  • In addition to said fee, a penalty ranging from Rs.10,000 to Rs.1,00,000 to be levied for not furnishing TDS statement within the prescribed time. No penalty if TDS statement is furnished within one year of the prescribed due date after payment of tax deducted along with applicable interest and fee.
  • It is proposed to levy penalty ranging from Rs.10,000 to Rs.1,00,000 for furnishing incorrect information in the TDS statement.
  • No penalty shall be levied if the deductor proves that there was a reasonable cause for the failure
  • Amendments on similar lines for levy of fee and penalty for delay in furnishing of TCS statement and furnishing of incorrect information in the TCS statement are also proposed to be made.
  • Amendment to be effective from 01.07.2012

Intimation after processing of TDS statement

  • Section 200A was inserted Vide finance (No.2) Act, 2009 to provide for processing of TDS statement. After processing of TDS statement, an intimation is generated specifying the amount payable or refundable. The intimation generated after processing of TDS statement is not

–         subject to rectification under section 154;

–         appealable under section 246A; and

–         deemed as notice of demand under section 156.

  • It is proposed to provide that the intimation generated after processing of TDS statement shall be

–         subject to rectification under section 154;

–         appealable under section 246A; and

–         deemed as notice of demand under section 156.

  • Amendment to be effective from 01.07.2012

“Person responsible for paying” in case of payment by Central Government or Government of a State

  • At present u/s 204 a ‘“person responsible for paying” has been defined to include employer, company or its principal officer or the payer.
  • Lack of clarity in the case of payment made by Central Government or by a State Government as to who is the person responsible for paying the sum to the payee
  • It is proposed to provide that in the case of payment by Central Government or a State Government, the Drawing and Disbursing Officer or any other person responsible for making payment shall be the “person responsible for paying” within the meaning of section 204
  • Amendment to be effective from 01.07.2012

Extension of time for passing an order under section 201 in certain cases

  • Amendment proposed in section 201 to extend the time limit of passing an order treating an assessee in default for non deduction/short deduction of tax from 4 years to 6 years
  • Amendment to be effective from 01.04.2010

Threshold for TDS on compensation or consideration for compulsory acquisition

  • Amendment proposed in section 194LA to increase the threshold limit of deduction of tax at source on payment of any compensation or consideration for compulsory acquisition of immovable property (other than agricultural land) from Rs. 1 lacs to Rs. 2 lacs.
  • Amendment to be effective from 01.07.2012

Threshold for TDS on payment of interest on debentures

  • At present u/s 193, a person responsible for paying interest to a resident individual on listed debentures of a company, in which public are substantially interested, is not required to deduct tax on the amount of interest payable if the aggregate amount of interest paid during a financial year does not exceed Rs.2,500/- and the interest is paid by account payee cheque.
  • In case of unlisted debentures of a company, no threshold limit is specified for deduction of tax on payment of interest.
  • It is proposed that no deduction of tax should be made from payment of interest on any debenture, (whether listed or not) issued by a company, in which the public are substantially interested, to a resident individual or Hindu undivided family, if the aggregate amount of interest on such debenture paid during the financial year does not exceed Rs.5,000 and the payment is made by account payee cheque
  • Amendment to be effective from 01.07.2012

E.     RATIONALIZATION OF INTERNATIONAL TAXATION PROVISIONS

Vodafone Shattered

  • Supreme Court in Vodafone International Holdings B. V. v. Union of India laid down following proposition:-

–         Source in relation to an income is to be construed where the transaction of sale takes place and not where the item of value, which was subject to the transaction, was acquired or derived from.

–         HTIL and Vodafone are offshore companies and since the sale took place outside India, applying the source test, the source is also outside India, unless legislation ropes in such transactions.

–         Section 9 has no “look through provision” and such a provision cannot be brought through construction or interpretation of a word “through” in section 9. In any view, “look through provision” will not shift the situs of an asset from one country to another. Shifting of situs can be done only by express legislation.

–         It is difficult to agree with the conclusions arrived at by the High Court that the sale of CGP share by HTIL to Vodafone would amount to transfer of a capital asset within the meaning of section 2(14) of the Indian Income Tax Act.

In order to over come the finding of this judgment following amendments are proposed

  • Explanation introduced in the definition of the capital assets u/s 2(14) to clarify that,  “property” includes and shall be deemed to have always included any rights in or in relation to an Indian company, including rights of management or control or any other rights whatsoever;’
  • New explanation introduced in the definition of transfer u/s 2(47) to clarify that ‘transfer’ includes and shall be deemed to have always included disposing of or parting with an asset or any interest therein, or creating any interest in any asset in any manner whatsoever, directly or indirectly, absolutely or conditionally, voluntarily or involuntarily by way of an agreement (whether entered into in India or outside India) or otherwise, notwithstanding that such transfer of rights has been characterized as being effected or dependent upon or flowing from the transfer of a share or shares of a company registered or incorporated outside India.
  • New explanation 4 introduced u/s 9(1)(i) to the effect that the expression “through” used in context of defining income deemed to accrues or arise in India through the transfer of capital assets situate in India, shall mean and include and shall be deemed to have always meant and included “by means of”, “in consequence of” or “by reason of.
  • New explanation 5 is introduced to clarify that an asset or a capital asset being any share or interest in a company or entity registered or incorporated outside India shall be deemed to be and shall always be deemed to have been situated in India, if the share or interest derives, directly or indirectly, its value substantially from the assets located in India.
  • New explanation introduced u/s 195 to the effect that obligation to deduct tax from the payments made to the non residents/foreign companies applies and shall be deemed to have always applied and extended to all persons resident or non resident whether or not non resident persons has

–         A residence or place of business or business connection in India or

–         Any other presence in any manner what so ever in India.

  • All these amendments are proposed with retrospective effect from 01-04-1962
  • Clause 113 of Finance Bill introduced to provide that not withstanding any thing contained in any judgment, decree or order of any court or tribunal or any authority or notices sent or taxes levied shall be valid and not be called in question.

Amendment in section 9(1)(vi)

  • Consideration for use or right to use of computer software is royalty and it includes and has always included transfer of all or any right for use or right to use a computer software (including granting of a license) irrespective of the medium through which such right is transferred.
  • Royalty includes and has always included consideration in respect of any right, property or information, whether or not

(a) the possession or control of such right, property or information is with the payer;

(b) such right, property or information is used directly by the payer;

(c) the location of such right, property or information is in India.

–         The term “process” includes and shall be deemed to have always included transmission by satellite (including up-linking, amplification, conversion for down-linking of any signal), cable, optic fibre or by any other similar technology, whether or not such process is secret.

–         These amendments will take effect retrospectively from 1st June, 1976.

Taxation of a non-resident entertainer, sports person etc.- IPL Effect

–         Section 115BBA amended to provide that income arising to a non-citizen, non-resident entertainer (such as theatre, radio or television artists and musicians) from performance in India shall be taxable at the rate of 20% of gross receipts.

–         It is also proposed to increase the taxation rate, in case of non-citizen, non-resident sportsmen and non-resident sports association, from 10% to 20% of the gross receipts.

–         Amendment will take effect from 1st April, 2013.

–         Consequential amendment is proposed in section 194E to provide for withholding of tax at the rate of 20% from income payable to non-resident, non-citizen, entertainer, or sportsmen or sports association or institution. This amendment will take effect from 1st July, 2012.

Double Taxation Avoidance Agreement (DTAA)

–         GAAR provision to have overriding effect over DTAA

–         Any term used in DTAA but defined lateron through notification shall be applicable from the date of coming into force of the agreement.

–         For availing benefit of DTAA non resident to produce Tax Residency Certificate (TRC) containing prescribed particulars.

 

F.      RATIONALIZATION OF TRANSFER PRICING PROVISIONS

Advance Pricing Agreement (APA)

–         Advance Pricing Agreement is an agreement between a taxpayer and a taxing authority on an appropriate transfer pricing methodology for a set of transactions over a fixed period of time in future. The APAs offer better assurance on transfer pricing methods and are conducive in providing certainty and unanimity of approach.

New section 92CC and 92CD to be introduced to provide a framework for advance pricing agreement under the Act. The proposed sections provide the following. –

  1. It empowers Board, to enter into an advance pricing agreement with any person undertaking an international transaction.
  2. Such APAs shall include determination of the arm’s length price or specify the manner in which arm’s length price shall be determined, in relation to an international transaction which the person undertake.
  3. The manner of determination of arm’s length price in such cases shall be any method including those provided in subsection (1) of section 92C, with necessary adjustments or variations.
  4. The arm’s length price of any international transaction, which is covered under such APA, shall be determined in accordance with the APA so entered and the provisions of section 92C or section 92CA which normally apply for determination of arm’s length price would be modified to this extent and arm’s length price shall be determined in accordance with APA.
  5. The APA shall be valid for such previous years as specified in the agreement which in no case shall exceed five consecutive previous years.
  6. The APA shall be binding only on the person and the Commissioner (including income-tax authorities subordinate to him) in respect of the transaction in relation to which the agreement has been entered into. The APA shall not be binding if there is any change in law or facts having bearing on such APA.
  7. The Board is empowered to declare, with the approval of Central Government, any such agreement to be void ab-initio, if it finds that the agreement has been obtained by the person by fraud or misrepresentation of facts. Once an agreement is declared void ab-initio, all the provisions of the Act shall apply to the person as if such APA had never been entered into.
  8. For the purpose of computing any period of limitation under the Act, the period beginning with the date of such APA and ending on the date of order declaring the agreement void ab-initio shall be excluded. However if after the exclusion of the aforesaid period, the period of limitation referred to in any provision of the Act is less than sixty days, such remaining period shall be extended to sixty days.
  9. The Board is empowered to prescribe a Scheme providing for the manner, form, procedure and any other matter generally in respect of the advance pricing agreement
  10. Where an application is made by a person for entering into such an APA, proceedings shall be deemed to be pending in the case of the person for the purposes of the Act like for making enquiries under section 133(6) of the Act.
  11. The person entering in to such APA shall necessarily have to furnish a modified return within a period of three months from the end of the month in which the said APA was entered in respect of the return of income already filed for a previous year to which the APA applies. The modified return has to reflect modification to the income only in respect of the issues arising from the APA and in accordance with it.
  12. Where the assessment or reassessment proceedings for an assessment year relevant to the previous year to which the agreement applies are pending on the date of filing of modified return, the Assessing Officer shall proceed to complete the assessment or reassessment proceedings in accordance with the agreement taking into consideration the modified return so filed and normal period of limitation of completion of proceedings shall be extended by one year.
  13. If the assessment or reassessment proceedings for an assessment year relevant to a previous year to which the agreement applies has been completed before the expiry of period allowed for furnishing of modified return ,the Assessing Officer shall, in a case where modified return is filed, proceed to assess or reassess or re-compute the total income of the relevant assessment year having regard to and in accordance with the APA and to such assessment, all the provisions relating to assessment shall apply as if the modified return is a return furnished under section 139 of the Act. The period of limitation for completion of such assessment or reassessment is one year from the end of the financial year in which the modified return is furnished.
  14. All the other provisions of this Act shall apply accordingly as if the modified return is a return furnished under section 139.

–                     These amendments will take effect from 1st July, 2012.

Examination of not reported transaction by the TPO

Section 92CA proposed to be amended retrospectively to empower Transfer Pricing Officer (TPO) to determine the Arm’s Length Price of an international transaction noticed by him in the course of proceedings before him, even if the said transaction was not referred to him by the Assessing Officer, provided that such international transaction was not reported by the taxpayer as per the requirement cast upon him under section 92E of the Act.

This amendment will take effect retrospectively from 1st June, 2002.

Transfer Pricing Regulations to apply to certain domestic transactions

The Supreme Court in the case of CIT Vs. Glaxo SmithKline Asia (P) Ltd., in its order has, after examining the complications which arise in cases where fair market value is to be assigned to transactions between domestic related parties, suggested that Ministry of Finance should consider appropriate provisions in law to make transfer pricing regulations applicable to such related party domestic transactions.

Therefore the transfer pricing regulations is extended to the transactions entered into by domestic related parties or by an undertaking with other undertakings of the same entity for the purposes of section 40A, Chapter VI-A and section 10AA.

It would apply to the transactions, which exceed a monetary threshold of Rs. 5 crores in aggregate during the year.

Definition of related parties for purpose of section 40A expended to include companies having the same holding companies.

This amendment will take effect from 1st April, 2013.

Determination of Arm’s Length Price (ALP)

–         It is proposed to amend the Income Tax Act to provide clarity with retrospective effect in respect of first proviso to section 92C(2) as it stood before its substitution by Finance Act (No.2), 2009 so that the tolerance band of 5% is not taken to be a standard deduction while computing Arm’s Length Price and to ensure that due to such retrospective amendment already completed assessments or proceedings are not reopened only on this ground. The amendments proposed above shall be effective retrospectively from 1st April, 2002.

It is clarified that second proviso to section 92C shall also be applicable to all proceedings which were pending as on 01.10.2009. The amendments will take effect retrospectively from 1st October, 2009.

Filing of return of income, definition of international transaction, tolerance band for ALP, penalties and reassessment in transfer pricing cases

It is proposed to amend Section 139 of the Act, to provide that in case of all assesses who are required to obtain and file Transfer Pricing report as per Section 92E of the Act, the due date would be 30th November of the assessment year. This amendment will be effective from A.Y.2012-13

It is proposed to amend section 92B of the Act, to provide for the explanation to clarify meaning of international transaction and to clarify the term intangible property used in the definition of international transaction and to clarify that the ‘international transaction’ shall include a transaction of business restructuring or reorganisation, entered into by an enterprisewith an associated enterprise, irrespective of the fact that it has bearing on the profit, income, losses or assets or such enterprisesat the time of the transaction or at any future date.This amendment will be effective from A.Y. 2002-03.

It is proposed to amend Section 92C(2) of the Act, so as to provide an upper ceiling of 3% in respect of power of Central Government to notify the tolerance range for determination of arms length price. This amendment will be effective from 01-04-2013.

It is proposed to amend Section 271AA to provide levy of a penalty at the rate of 2% of the value of the international transaction, if the taxpayer.-

(i) fails to maintain prescribed documents or information or;

(ii) fails to report any international transaction which is required to be reported, or;

(iii) maintains or furnishes any incorrect information or documents.

This penalty would be in addition to penalties in section 271BA and 271G.This amendment will take effect from 1st July, 2012.

It is proposed to amend Section 147 of the Act, to provide that in all cases where it is found that an international transaction has not been reported either by non-filing of report or otherwise by not including such transaction in the report mentioned in section 92E then such non-reporting would be considered as a case of deemed escapement of income and such a case can be reopened under section 147 of the Act. This amendment will take effect from 1st July, 2012.

Appeal against the directions of the Dispute Resolution Panel (DRP)

Department can file appeal against the direction issued by DRP before ITAT within 60 days of passing of order by AO in pursuance of directions of the DRP. These amendments will take effect from the 1st day of July, 2012.

Power of the DRP to enhance variations

Explanation inserted in 144C to clarify that the power of the DRP to enhance the variation shall include and shall always be deemed to have included the power to consider any matter arising out of the assessment proceedings relating to the draft assessment order. This power to consider any issue would be irrespective of the fact whether such matter was raised by the eligible assessee or not. This amendment will be effective retrospectively from the 1st day of April, 2009.

Completion of assessment in search cases referred to DRP

In search cases referred to DRP time limit of section 144C will override the time limit of section 153B.

Order passed by the DRP shall not be appealable before CIT(A)

G.    GENERAL ANTI-AVOIDANCE RULE (GAAR)

New chapter X A (containing section 95 to 102) proposed to the effect that an arrangement entered into by the assessee may be termed as an impermissible avoidance arrangement and the consequences in relation to the tax arising there from may be determined as per the new chapter.

The new chapter may be applied to any step or part of the arrangement.

AN impermissible avoidance arrangement means an arrangement, the main purpose/one of the main purposes of which is to obtain a tax benefit and which also satisfies at least one of the following four tests:-

(a) The arrangement creates rights and obligations which are abnormal.

(b) It results in misuse or abuse of provisions of tax laws.

(c) It lacks commercial substance

d) It is not in a bonafide manner/purpose.

There is deeming presumption that the purpose of the arrangement is to obtain tax benefit unless otherwise proved.

Lack of commercial substance defined in section 97.

Consequences of declaring an arrangement as an impermissible avoidance arrangement is to disregard the whole or part of the arrangement.

The procedure for invoking GAAR is proposed as under:-

–         New section 144BA to be introduced to the effect that whenever AO at any stage of proceedings before him considers a transactions to be impermissible avoidance arrangement, he may make a reference to the Commissioner.

–         Commissioner, if satisfied, to grant opportunity of hearing of maximum 60 days to the assessee.

–         In case no objection received, then commissioner to issue directions.

–         In case the assessee objects but CIT is not satisfied, he shall make a reference to the approving panel. In case CIT is satisfied, he shall pass order.

–         The approving panel shall grant opportunity of hearing to the assessee and AO.

–         Direction of approving panel to be binding on AO.

–         Direction to be passed by approving panel within 6 months.

–         Approving panel to be constituted of not less than 3 members of the rank of CIT and above.

–         The board to make rules for efficient functioning of approving panel.

–         The AO’s order passed with the approval of commissioner u/.s 144BA shall be appealable before the ITAT and not before the CIT(A).

H.    OTHER CLARIFICATIONS

Extension of time for completion of assessments and reassessments

  • The existing provisions of section 153 and 153Bprovides the time limit for completion of assessment and reassessment of income by AO.
  • Proposed to amend these sections to increase the time limits for completion of assessments and reassessments by three months
  • Amendment to be effective from 01.07.2012

Assessment of charitable organization in case commercial receipts exceed the specified threshold

  • Section 2(15) defines charitable purpose to include “advancement of any other object of general public utility” as charitable purpose provided that it does not involve carrying on of any activity in the nature of trade, commerce or business. However, if it involves carrying on of any activity in the nature of trade, commerce or business but the aggregate value of receipts from the commercial activities does not exceed Rs. 25 lacs in P.Y., then the purpose of such institution shall be considered as charitable, and accordingly, the benefits of exemption shall be available to it.
  • Thus, a charitable trust or institution pursuing advancement of object of general public utility may be a charitable trust in one year and not a charitable trust in another year depending on the aggregate value of receipts from commercial activities.
  • However, this temporary excess in one year may not be treated as altering the very nature of the trust or institution so as to lead to cancellation of registration or withdrawal of approval or rescinding of notification issued in respect of trust or institution.
  • Therefore, it is proposed to amend section 10(23C), section 13 and section 143 to ensure that such organization does not get benefit of tax exemption in the year in which it’s receipts from commercial activities exceed the threshold whether or not the registration or approval granted or notification issued is cancelled, withdrawn or rescinded.
  • Amendment to be effective retrospectively from A.Y. 09-10

Due date of furnishing audit report in case of international transactions

  • At present, the report of audit u/s 44AB is required to be furnished by 30th Sept of A.Y. & the due date of furnishing of return by the corporate assessee’s, who have undertaken international transactions, was extended by FA 2011 from 30th Sept to 30th Nov of A.Y.
  • It is proposed to provide that the due date for furnishing tax audit report u/s 44AB would be the same as due date specified for furnishing of return u/s 139.
  • Amendment to be effective retrospectively from A.Y. 12-13

Presumptive taxation not to apply to professions etc.

  • At present u/s 44AD, profits and gains from business of a person carrying on any business, except business of plying, hiring or leasing goods carriage, having turnover or gross receipt of less than Rs.60 lacsis deemed to be a sum equal to 8% of total turnover or gross receipts
  • It is proposed to amend section 44AD to clarify that this presumptive scheme is not applicable to

–         a person carrying on profession as referred to in sub-section (1) of section 44AA

–         persons earning income in the nature of commission or brokerage income; or

–         person carrying on any agency business

  • Amendment to be effective retrospectively from A.Y. 11-12

Minimum Alternate Tax (MAT)

  • At present u/s 115JB, every company is required to prepare its accounts as per Schedule VI of the Companies Act, 1956. However, as per provisions of Companies Act, 1956, certain companies, e.g. insurance, banking or electricity company, are allowed to prepare their profit and loss account in accordance with the provisions specified in their regulatory Acts.
  • In order to align the provisions of IT Act with Companies Act, 1956, it is proposed to amend section 115JB to provide that the companies which are not required u/s 211 of the Companies Act to prepare their profit and loss account in accordance with Schedule VI of the Companies Act, 1956, profit and loss account prepared in accordance with the provisions of their regulatory Acts shall be taken as a basis for computing the book profit u/s 115JB.
  • In certain cases, amount standing in the revaluation reserve is taken directly to general reserve on disposal of a revalued asset & thus, the gains attributable to revaluation of the asset is not subject to MAT liability.
  • It is, therefore, proposed to amend section 115JB to provide that the book profit for the purpose of section 115JB shall be increased by the amount standing in the revaluation reserve relating to the revalued asset which has been retired or disposed, if the same is not credited to the profit and loss account.
  • Also proposed to omit the reference of Part III of the Schedule VI of the Companies Act, 1956 from section 115JB in view of omission of Part III in the revised Schedule VI under the Companies Act, 1956.
  • Amendment to be effective from A.Y. 13-14

Liability to pay advance tax in case of non-deduction of tax

  • At present u/s 209, amount of advance tax payable is computed by reducing the amount of income-tax which would be deductible or collectible during the financial year from income-tax on estimated income. Therefore, in cases where the assessee receives or pays any amount (on which the tax was deductible or collectible) without deduction or collection of tax, it has been held by Courts that he is not liable to pay advance tax to the extent the tax is deductible or collectible from such amount.
  • It is proposed to amend section 209to provide that where a person has received any income without deduction or collection of tax, he shall be liable to pay advance tax in respect of such income.
  • Amendment to apply in relation to advance tax payable for F.Y.2012-13 and subsequent financial years

Exemption from Wealth Tax – Reserve Bank of India

  • Wealth tax is levied on individual, HUF and company & since the definition of “Company” under the Act includes a corporation established by or under the Central, State or Provincial Act, Reserve Bank of India (RBI), being a corporation established under the Central Act, was deemed as company for the purpose of levy of wealth-tax and shall be liable to pay wealth-tax.
  • It is proposed to amend section 45 of the Act to provide that wealth-tax shall not be levied on the net wealth of RBI.
  • Amendment to be effective retrospectively from A.Y.1957-58

Definition of Commissioner to include Director

  • Section 116 of IT Act lists various IT Authorities. At clause (c) of this section, DIT or CIT or CIT(A) have been listed as one Income Tax Authority. U/s 117(1) of the Act, the Central Government appoints such persons as IT Authorities.
  • It is proposed to amend provisions of section 2(16) to include a DIT appointed u/s 117(1) within the definition of a Commissioner. Effective from 01.04.1988

Cost of acquisition in case of certain transfers

  • At present u/s 47(xiv) and 47(xiii), transfer of assets by a sole proprietorship or a firm to a company on conversion are not regarded as transfer. When subsequent sale of such assets by the company is made, there is no reference in the provisions of section 49 with regard to the cost to be taken for such assets for computing capital gains.
  • It is proposed to amend provisions of section 49 of IT Act to provide that in case of conversion of sole proprietorship or firm into a company which is not regarded as transfer, the COA of asset in the hands of the company would be the same as that in the hand of the sole proprietary concern or the firm.
  • Amendment to be effective retrospectively from A.Y. 99-00

Capital gains tax from sale of agricultural land by a Hindu undivided family (HUF)

  • At present u/s 54B, capital gains on transfer of land which, in the two years preceding the year in which it has been sold, has been used for agricultural purposes by assessee or his parent, is exempt if whole of capital gains has been reinvested in the purchase of agricultural land in the next two years.
  • It is proposed to amend provisions of section 54B of IT Act to provide that the rollover relief is available if the land is used for agricultural purposes by an individual or his parent, or by a HUF.

Reference to a Valuation Officer

  • At present u/s 55, in a case where the capital asset became the property of the assessee before 01.04.1981, assessee has the option of substituting the FMV of the asset as on 01.04.1981 as the cost of the asset. In such a case the adoption of a higher value for the cost of the asset as the fair market value as on 01.04.1981, would lead to a lower amount of capital gains being offered for tax.
  • It is proposed to amend provisions of section 55A whereby if the AO is of the opinion that the value taken by the assessee as on 1.4.1981is higher than the fair market value of the asset as on that date, he would be enabled to make a reference to the Valuation Officer for determining the fair market value of the property.
  • Amendment to be effective from 01.07.2012

Rate of tax for STCG u/s 111A

  • At present u/s 111A, tax on short-term capital gains, in the case of equity shares in a company or units of an equity oriented fund on which Securities Transaction Tax (STT) has been paid, is levied @ 15%.However, in the proviso to this section while providing relief, the rate of STCG is still referred to as 10%.
  • It is proposed to amend provisions of proviso to section 111A of the IT Act to tax STCG @15%.
  • Amendment to be effective retrospectively from A.Y. 2009-10

Capital gains in cases of amalgamation and demerger

  • Under the provisions of section 47(vii) any transfer by a shareholder, in a scheme of amalgamation of a capital asset being a share or shares held by him in the amalgamating company is not regarded as a transfer if,

–     any transfer is made in consideration of the allotment to him of any share or shares in the amalgamated company, and

–     the amalgamated company is an Indian company.

  • Now as per the amendment there is no requirement to follow the condition (a) if the amalgamation is between the holding and its subsidiary and accordingly in case of demerger also condition (a) is not required to be fulfill for holding and subsidiary company.

Fair Market Value to be full value of consideration in certain cases

  • It is proposed to insert a new provision (section 50D) in the Income-tax Act to provide that fair market value of the asset shall be deemed to be the full value of consideration if actual consideration is not attributable or determinable.
  • Amendment to be effective from A.Y. 13-14

Exemption of any sum or property received by an HUF from its members

  • Amendment is made in section 56(2)(vii) as to provide that any sum or property received without consideration or inadequate consideration by an HUF from its members would also be excluded from taxation.
  • Amendment to be effective retrospectively from 01.10.2009

Processing of return of income where scrutiny notice issued

  • Processing of return will not be necessary in a case where notice under sub–section (2) of section 143 has already been issued for scrutiny of the return.
  • Amendment will take effect from the 1st day of July, 2012.

Notification of a class of search cases where compulsory reopening of past six years not required

  • At present u/s 153A, it is mandatory to issue a notice for filing of tax returns for 6 A.Y.’s immediately preceding the A.Y. relevant to P.Y. in which search is conducted u/s 132 or requisition is made u/s 132A.
  • It is proposed to amend provisions of section 153A and 153C to empower the Central Government to notify cases or class of cases in which AO shall not issue notice for initiation of proceedings for preceding 6 A.Y.’s. However, action for completion of assessment proceedings for A.Y. relevant to P.Y. in such class of cases in which search or requisition has been made would be taken. This would result in initiating assessment proceedings only for A.Y. relevant to P.Y. in which search or requisition has been made.
  • Amendment to be effective from 01.07.2012

Charging of interest on recovery of refund granted earlier

  • It is clarified that the provisions of section 234D would be applicable to any proceeding which is completed on or after 1st June, 2003, irrespective of the assessment year to which it pertains.
  • Amendment to be effective retrospectively from 01.06.2003

Related person for the purpose of making an application before Settlement Commission

  • Amendment is made in the section 245C so as to change the definition of related persons. Earlier a person was deemed to be a related person if he holds more than 20% shares or 20% share in profits, at any time during the previous year
  • After amendment a person shall be deemed to have a substantial interest in a business or profession if such person is a beneficial owner of not less than 20%of shares or of 20% share in profits on the date of search.
  • Amendment to be effective from 01.07.2012

Fee for filing of applications before Authority for Advance Rulings (AAR)

  • Increase in the fee for filing an application for advance ruling from Rs. 2,500/- to Rs.10,000/- or such fee as may be prescribed, whichever is higher.
  • Apply to any application for advance ruling filed on or after the 01.07.2012.

Authorization or requisition and subsequent assessment in search cases

A new section 292CC has been inserted where in it is provided that:-

  • It shall not be necessary to issue an authorization or make a requisition separately in the name of each person;
  • Where an authorization has been issued or a requisition has been made mentioning therein the name of more than one person, the mention of such names of more than one person on such authorization or requisition shall not be deemed to construe that it was issued in the name of an association of persons or body of individuals consisting of such persons;
  • An authorization has been issued or requisition has been made mentioning therein the name of more than one person, the assessment or reassessment shall be made separately in the name of each of the persons mentioned in such authorization or requisition.
  • The amendment effect retrospectively from the 1st day of April, 1976

Prohibition of cash donations in excess of ten thousand rupees

  • Amendment in Sections 80G and 80GGA so as to specify therein that any payment exceeding a sum of Rs. 10,000/- shall only be allowed as a deduction if such sum is paid by any mode other than cash.
  • Apply in relation to assessment year2013-14

Eligibility conditions for exempt life insurance policies

  • It is proposed to amend section 10(10D) so as to provide that the exemption for insurance policies issued on or after 1st April, 2012 would only be available for policies where the premium payable for any of the years during the term of the policy does not exceed 10% of the actual capital sum assured. As against the previous limit of 20% of the actual capital sum assured.
  • Capital sum assured would be the minimum of the sum assured in any of the years of the policy so as to have a check on the above limit.
  • Amendment to be effective from A.Y. 13-14

Eligibility condition for deduction in respect of life insurance policies

  • Deduction for life insurance premium as regards insurance policies issued on or after 1st April, 2012 shall be allowed for only so much of the premium payable as does not exceed 10% of the actual capital sum assured as against the earlier limit of 20%.
  • Amendment to be effective from A.Y. 13-14

Compiled By

Kalani & Co.

Chartered Accountants

S-23A, Mangal Marg, Bapu Nagar, Tonk Road, Jaipur

Tel: 0141-2709001, 2701001

Email: jaipureast@kalanico.com

More Under Income Tax

Posted Under

Category : Income Tax (25028)
Type : Articles (14344) Featured (4134)
Tags : Budget (1473)

0 responses to “Budget 2012 – Direct Tax Proposals Highlight”

  1. Milind says:

    Dear Sir,
    Greetings,
    In the year 12-13 budget, it is said that the Interest earn on Term Deposits other than
    postal/NSC is taxable. Interest earn on saving bank account up to 10,000 is not taxable.
    Can you extend your comment on Term Deposit. If it is taxable then it is difficult to park
    mony in Bank Term Deposits.
    For example if you invest Rs.1000 for 1 year @ 10% interest per annum you earn Rs100 by way of interest & Rs.100 fully taxable.
    Even on your website it is not mentioned, it is in Marathi news paper ( Loksatta ) on
    dt.9/04/12.
    Can you guide more on this.
    Pl.reply.
    Thanks & Rgds.

  2. PRASHANT says:

    Thank you sir

Leave a Reply

Your email address will not be published. Required fields are marked *